Economic giants endorse plan to try to avert financial crises

Published 8:00 pm, Friday, April 11, 2008

By JEANNINE AVERSA

Associated Press

WASHINGTON -- Finance officials from the world's top economic powers endorsed a plan Friday aimed at preventing another financial crisis like the credit and mortgage debacles that erupted in the United States and quickly sent tremors around the globe.

"Rapid implementation" of the plan "will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the markets," the G7 officials said in a joint statement.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke hosted the Group of Seven discussions, where officials embraced a plan that would seek to increase the openness, or transparency, of financial markets and to sharpen regulators' response to urgent financial problems.

Besides the United States, the other members of the G7 are Japan, Germany, Britain, France, Italy and Canada. Friday's action preceded the weekend meetings of the 185-nation International Monetary Fund and the World Bank.

Risks to the United States and the global economy have intensified since finance officials from the Group of Seven countries last gathered here in October. Many economists now believe the United States has fallen into a recession and the odds of a worldwide downturn have risen sharply -- to one in four -- according to the IMF, a global financial firefighting institution.

Even as the financial officials talked about the best ways to battle future financial emergencies, Wall Street took another plunge. The Dow Jones tumbled more than 250 points.

"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," the G7 officials said.

In the United States, where credit troubles sprang forth with a vengeance last August and quickly spread financial turmoil worldwide, the damage is sorely felt. Foreclosures have surged to record highs, job losses in the first three months of this year have neared the staggering quarter-million mark and financial companies have racked up billions of dollars in losses. The once mighty Bear Stearns, the fifth-largest investment bank in the United States, crashed, prompting a takeover by JP Morgan in a controversial deal backed by the Fed.

Worldwide financial losses could approach $1 trillion over two years, the IMF said earlier this week.

"Given the significant short-term downside risks, we are taking action," Paulson said of the G7's decision to adopt the plan. "There may be more bumps in the road," he warned.

The Financial Stability Forum, a group that includes central bankers and major financial regulators from around the world, developed the plan adopted by the G7. The forum is headed by Mario Draghi, chief of Italy's central bank, who presented his group's findings to the other G7 officials during their closed-door meeting.

The plan is designed to make financial markets less secretive and improve supervision, which in theory would help prevent a repeat of the current financial debacles.